Eton Park Capital opens new positions 3Q 2013

Part 3
Eton Park Capital opens new positions 3Q 2013 (Part 3 of 6)

Eton Park Capital opens new positions in FDO, STZ, BID, EQIX, Sells NLSN, PCLN – 13F Flash

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In this six-part series, we will go through some of the main positions Eton Park Capital traded this past quarter

Eton Park Capital Management is a multi-strategy hedge fund founded in November 2004 by former Goldman Sachs partner Eric Mindich.

The firm started new positions in Family Dollar Stores (FDO) , Constellation Brands (STZ), Sotheby’s (BID), and Equinix Inc. (EQIX) and sold positions in Nielsen Holdings NV (NLSN) and Priceline.com Inc. (PCLN).

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

Why buy Sotheby’s (BID)?

Sotheby’s has been a favorite with hedge funds this quarter with Ellington Management Group too disclosing a position in the auction house besides Eton Park. Daniel Loeb’s Third Point is the largest shareholder with a 9.3% stake. On 2 October, Third Point wrote an open letter, where it disclosed a 9.3% stake in the company, and said it is concerned about the company’s leadership, shareholder misalignment, strategic direction, and board governance. It called for the resignation of CEO William Ruprecht, adding the company’s losing market share to privately held Christie’s due to lack of leadership and strategic vision at its highest levels. In its long list of grievances, it also criticized the management for their extravagant spending and corporate perks enjoyed at the shareholder’s expense. In response, Sotheby’s adopted a stockholder rights plan – a “poison pill” that will trigger if any person or group acquired a stake of more than 10%. Third Point then issued a statement saying it is disappointed that Sotheby’s board had adopted the poison pill – a relic from the 1980’s – as its disproportionate response to the valid concerns expressed in its letter rather than initiating a constructive dialogue.In November, the company posted “better-than-expected” results in 3Q 2013 as compared to the same period in the previous year due to increase in private sale commissions and auction commission revenues. It said the third quarter net loss of $30.1 million or $0.44 per share reflected a $2.4 million, or 7%, improvement over the prior year. As of 11 November, the stock was up 49% YTD.

On 2 October, Third Point wrote an open letter, where it disclosed a 9.3% stake in the company, and said it is concerned about the company’s leadership, shareholder misalignment, strategic direction, and board governance. It called for the resignation of CEO William Ruprecht, adding the company’s losing market share to privately held Christie’s due to lack of leadership and strategic vision at its highest levels. In its long list of grievances, it also criticised the management for their extravagant spending and corporate perks enjoyed at the shareholder’s expense. In response, Sotheby’s adopted a stockholder rights plan – a “poison pill” that will trigger if any person or group acquired a stake of more than 10%. Third Point then issued a statement saying it is disappointed that Sotheby’s board had adopted the poison pill – a relic from the 1980’s – as its disproportionate response to the valid concerns expressed in its letter rather than initiating a constructive dialogue.

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Eton Park Capital founder Eric Mindich has a degree in economics, summa cum laude, from Harvard University. The fund is estimated to have around $19.4 billion in assets under management and has offices in New York, London, and Hong Kong. The fund follows a bottom-up, research-driven approach seeking mispriced assets that fall both within and between conventionally defined investment strategies. It invests in both public and private markets, and investors in the fund generally have their capital committed for between three and five years—considerably longer than the quarterly redemption notices characteristic of many hedge funds. Eton Park has a global approach to investing and flexibly allocates capital between regions in the same bottom-up, idea-driven manner that it applies to investment strategies within a region. It focuses its investments in Europe, North America, Latin America, Eastern Europe, Asia, the Middle East, and South Africa. Cross-border strategies are also an important area of emphasis.

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